Super-rich shun London over non-dom plans, say estate agents

Wealthy foreigners are shunning London's luxury housing market following Labour's announcement that it will end their "non-dom" status if it wins the UK's general election, according to estate agents.

Property deals have begun to fall through in the days since Ed Miliband laid out his plans, they revealed, with some foreign residents also putting their homes up for sale and fleeing the UK.

The announcement, combined with Labour's plan to introduce a mansion tax on high-value homes, has led many foreigners to conclude that the UK is no longer an attractive and reliable home for the rich, agents said.

During the past two years Conservative chancellor George Osborne has also made tax changes that have increased the burden on the affluent. The introduction of capital gains tax on the proceeds of property sales came into force on April 6 and is believed by agents to have contributed to owners' jitters.

Ed Mead, a director of Douglas & Gordon estate agents, said his company had carried out 37 valuations in the past month for owners of high-end homes who were thinking of selling up, when the normal level is about six.

"It is like the 1970s again, when waves of wealthy people left Britain and it was a disaster," Mr Mead said.

Sales of homes worth more than £2m have dropped by 80 per cent in the past year, according to estate agents Douglas & Gordon.

Charles McDowell, an independent agent who acts for some of the wealthiest families in London, said that two deals he was involved in had collapsed this week as a result of the non-doms plan, while two families he acts for had asked him to put their homes up for sale.

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"Britain has gone from being a safe, predictable tax environment to being not predictable and not attractive financially," he said. "My clients feel under attack, they are not going to invest in London any more."

Trevor Abrahmsohn, a veteran property agent at Glentree Estates, said the non-doms proposal was "completely mad".

About 50 per cent of the internationally mobile businesspeople among his clients were talking about "establishing citizenship elsewhere", he said: "It is a very big topic of conversation."

"The message [the non-dom policy] sends to my clients is that Britain is closed for business," he said. "Don't invest in this country, we don't like foreigners, that is the message."

Wealthy foreigners are a net economic benefit to the country, Mr Mead said. Research carried out last year found that the average buyer of a £15m home spent £4m-£5m a year on goods and services in Britain.

In total the capital's super-rich add £4bn a year to its economy, the research by Ramidus Consulting, an economic consultancy, found.

House price growth in London's priciest areas has flatlined during the past six months, for the first time in five years, according to data from estate agent Knight Frank. Rents are rising strongly as the capital's wealthy eschew buying and choose instead to rent.

Uncertainty about the outcome of the election is a key factor in buyers' hesitance, according to Knight Frank.

But Roarie Scarisbrick, a partner at agents Property Vision, played down the market conditions.

Some of his clients are "nervous" about the political uncertainty, he said, and the non-doms proposal "is not helpful", but, he added, "we've been here before, deal volumes are always way down before elections".

"There is always a reaction where people threaten to move to Monaco or the Isle of Man or Singapore or wherever, but actually there really aren't that many other places which are attractive places to go and escape from taxes on wealth," he said.

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